2. The design of an organization is often a critical enabler for the
achievement of a company’s strategy and goals, ongoing innovation,
and streamlined operations. During our years of experience helping
clients reorganize their operations, we have identified seven mistakes
made by companies.
3. 1. Not knowing what you are
trying to achieve
Before moving boxes and lines on an organization chart, it
is important to know why you are doing the reorganization.
Is it a result of a merger, acquisition, or downsizing? Are
you trying to reduce costs and improve efficiencies? Are
you struggling with performance issues? Are there too
many direct reports, which may be impeding both
employee development and innovation? Is the reporting
structure too complex? Clear guidelines that reflect what
the goals of the new organization are will help companies
ensure that the redesigned organization will attain those
stated goals.
4. 2. Structuring an organization for
specific personnel
is not uncommon for key people within an organization to have tremendous
influence due to their tenure, expertise, or importance to certain client
relationships. As a result, there is a risk that the preferences of the individual
will become a priority during organization design rather than the objectives
and requirements of the business. It is incredibly important to separate the
organization design component from the actual selection of staff.
Strategy should drive organization design, and organization design determines
the type of people who should be selected. If you design an organization based
on the people, the organization will not be set up most effectively to support
the overall end objectives. Skill sets may not match future needs and labor
costs can be misaligned. And while placing a single individual in a position that
is not well-matched may appease guilt or maintain a prior relationship, the
larger organization will suffer, putting revenue and efficiency at risk.
Additionally, the individual may become disengaged over time while working
in a position for which he or she is not properly suited. On the whole, designing
an organization based on the people results in compartmentalized processes
with components owned by different people, reducing overall efficiency, and
jeopardizing the organization’s support of the overall business strategy.
5. 3. Causing more disruption than
needed
ScottMadden sometimes encounters clients who view
reorganization as an opportunity to “clean house.”
Although it is true that the need for change usually
provides a good opportunity to also address other
inefficiencies or problem areas, leaders should be
cautious about causing more disruption than
necessary. Drastic staffing cuts or process changes can
result in reduced employee morale, the loss of valuable
talent, stagnated innovation, and an overall distraction
from the mission of the organization.
6. 4. Making decisionsand having
sidebar agreements outside of the
agreed-upon process
A sidebar or supplemental agreement that compromises the
documented, agreed-upon, communicated process threatens project
success. These actions can open the door to additional exceptions to
the organization design process and can result in an overall lack of
trust in the organization’s leadership going forward. For example,
management has set forth a process of evaluating and selecting for all
reorganized positions. Two managers have a sidebar discussion in the
hall that they really want “someone like Kim” in one of the positions.
Both managers agree and decide to put Kim in the position and
determine who will backfill her in her current position, despite already
communicating that the two positions will be posted and interviews
will be conducted for final selection.
While it may seem harmless at the time to make minor adjustments to
the agreed-upon process, the act of doing so threatens the project by
creating the justification for making larger exceptions later on in the
process, as well as demonstrating to the end population that the
process is not “fair.”
7. 5. Skipping current state
assessment
Many organizations desire to jump directly to the
organization design stage before conducting a detailed
current state assessment (CSA) that includes current costs,
volumes, and service levels of the organization. It is
imperative that a comprehensive CSA is completed prior to
the design, as the design is dependent upon many of the
metrics and standards that are established within the CSA.
Gauging improvements in efficiency and/or performance
from the redesign often depends on an organization’s
ability to analyze and compare layers, spans, and cost-to-
manage to standards. A CSA forms the basis for these and
other analyses, without which decisions are not fully
informed.
8. 6. Breaking the circle of
confidentiality
It is incredibly important for participants involved in the
redesign to keep project information inside the circle of
confidentiality. Revealing too much too soon to those outside the
“Circle of Trust” can threaten an organization’s level of
engagement and overall productivity. The design of a new
organization structure brings with it new roles, responsibilities,
and reporting relationships. These changes can encourage or
discourage personnel, and therefore have the potential to
threaten the effectiveness of the new structure. The performance
of individuals or entire departments can be compromised if
people think they will not have a job in the future organization,
and this has a network effect on the rest of the organization. In
addition, organizations may lose their most talented individuals
who feel uncertain about their future within the new
organization, while being highly sought after in the marketplace.
9. 7. Bypassing a formal change
management and communications
plan
It is essential that a formal plan is developed to support the
communication of the right information at the right point in the
process. Details about the new organization, along with details
of the selection process, should be communicated as they are
finalized to all levels of the organization. This will help avoid
surprise or confusion about the responsibilities and expectations
during the change. If rumors conflict with formal
communication during the process, the legitimacy of the
organization will be jeopardized.
Reorganizations can be highly successful ventures. However, by
understanding what your main drivers are on the front end,
whether you are promoting growth, cutting costs, changing
culture, or changing overall operations, you can ensure you
achieve your goal of better performance.
